The Real Reason Auto Insurance Rates Are So High

For over a decade Louisiana’s auto insurance rates have ranked as one of the most expensive in the nation. The insurance industry has consistently blamed our high rates on trial lawyers and our Courts. The real reason our rates are so high will likely surprise you.

In an effort to try and identify the actual cause of our high insurance rates, Douglas Heller, a nationally-acclaimed auto insurance reform expert, conducted a survey of our insurance market and his findings should outrage every person in Louisiana.

Most people probably assume their auto insurance rates are based on their age, location, and driving history. That was my assumption. It is logical to charge younger people or people who live in larger cities higher rates. These people are more likely to cause an automobile crash.

But Mr. Heller’s research revealed that insurance companies are using completely irrelevant factors in determining a driver’s rates. Four of Louisiana’s six largest auto insurance companies increase rates for people who have lost a spouse compared with what is charged when they are married. The Louisiana Insurance Commissioner, Jim Donelon, allows companies to charge this “widow penalty” even when the customer has a clean driving record. Many States make it illegal for companies to impose a “widow penalty” on a person when they lose their spouse.

Mr. Heller also found that women are charged more for insurance than men. There is absolutely no legitimate reason to charge a woman more for auto insurance than a man.

Finally, most people do not realize that insurance companies use a customer’s credit history in setting the premiums they charge. It is important to remember that customers are not asking insurance companies for a loan. They are purchasing mandatory insurance coverage. If a person does not pay their premiums, the insurance company can just cancel their insurance.

This penalty on the poor is not a minor thing. Louisiana drivers face an average penalty of $2,026 per year for having a credit score in the worst tier. Drivers in Louisiana pay an average of 60% more and as much as 135% more if they have poor credit scores.

Most shockingly, a driver in Louisiana with a perfect driving record but poor credit pays on average $905 more than a driver with excellent credit and a conviction for drunk driving. Let that sink in. A person who has been convicted of drinking and driving pays less than someone who has a perfect driving record, simply because they have a better credit history. That is absurd.

Senator Jay Luneau, who represents parts of Natchitoches Parish, filed a common sense bill that would have prevented an insurance company from considering a person’s credit history, sex, or whether they are a widow, when determining a driver’s insurance rates. Several States that have lower insurance rates have similar laws.

Insurance Commissioner Donelon, who is responsible for regulating insurance companies in our State, sided with the insurance industry and did not support the bill. Without Commissioner Donelon’s support, the bill was defeated.

Louisiana Citizens should contact their State Senator, State Representative, and Commissioner Donelon and demand that auto insurance companies be prevented from using a person’s sex, credit history and widow status when fixing their insurance premiums. To punish a person for losing their spouse is immoral and should be illegal.

Until our elected representatives focus on the true reasons our insurance rates are so high, we will never be able to fix this real problem. No one disputes that our insurance rates are too high. Maybe if insurance companies were required to fix rates based on people’s driving history, we might actually see our rates go down.

One of the biggest reasons our rates are so high is because we have so many uninsured drivers. A large portion of our population simply cannot afford insurance premiums. This should not be surprising when you consider those drivers are charged so much more simply because they are poor.

There are many other things we can do to lower rates. We should invest more to improve the roads in our State. We should also impose greater penalties on distracted drivers who use their cellphones while they are operating a vehicle.

But we must address how insurance companies fix our rates. If you find all of this as hard to believe as I did, you can watch Mr. Heller’s testimony – CLICK HERE

Also, the Bayou Brief, a nonprofit online news publication, recently conducted an excellent investigative series on this topic, which can be found here: CLICK HERE

Who wrote this? Do you have any documentation to support your reasoning. I think it is indeed mostly
Uninsured motorist, and our high numbers of DUI’s.
Someone in the insurance industry please comment on this.

I thought it was because there are so many personal injury lawsuits with big payouts for the plaintiffs. But if what this article says is true…. It’s just plain crazy! I pay higher premiums because I’m a woman? I just became more of a feminist than I was yesterday.

I totally agree Matt. I was in the insurance business for many years and people would move into LA and rates doubled. I do not know why tort reform was not mentioned in this article. If anyone has been in a wreck, they know what I mean. Also staging wrecks is big in this state. An attorney I knew once told me ” he had a funnel going to our claims office”. Enough said!

I find it very hard to believe that the reason Louisiana has such high rates is because of spousal loss and low credit scores. The writer of this article offers as almost an after-thought, oh, yeah, and uninsured motorists.

UNINSURED MOTORISTS is the real reason we pay so much. It’s the same as healthcare insurance, those with it PAY for those who don’t.

And throw in the wanton corruption in Louisiana politics, such as Jim Donelon getting kickbacks from the insurance industry, and there ya go. (no, I do not have any proof of the kickbacks, just that it’s a safe bet given this is Louisiana)

Well consider that the 3 previous Insurance Commissioners have all spent time in prison for corruption. I have no doubt the Commissioner does not have our best interest in mind. The legislature needs to get serious about solving this issue.